Last week’s collapse of the proposed merger of two Danish operators is a reminder of just how difficult the mobile industry is finding it to win support for consolidation. Despite some notable successes – in Germany in particular – mobile operators are having a tough time convincing regulators of the benefits of moving from four-operator to three-operator markets.
When telecoms operators make their case to a regulator, their standard argument is that a larger, merged operator will have more resources to invest in wide, deep, high-speed broadband networks than two smaller, less profitable (or unprofitable) ones. However, this argument often loses out to concerns that market consolidation will result in less competition and higher prices.
It is too early to say whether regulators are right to be worried about prices rising after market consolidation. Austria and the Netherlands have both gone from five operators to three in the last five years; although there has undeniably been some easing of price pressure, it is impossible to say how much this has been due to market consolidation.
Operators need to work harder to win the argument that one operator is better than two. Two operators will inevitably invest more than one operator, but some of that investment may be duplicated.
It might, therefore, be preferable in terms of network capacity and coverage to have one operator investing, for example, two-thirds as much as two operators.
Mobile operators should start by changing the public perception of what they are, what they do, and how they benefit the economy and the wider society. Few people today understand how much investment is required to build a mobile network or how many jobs the industry supports. The mobile industry gives every impression of being a highly profitable growth sector rather than a rapidly maturing market that is desperately seeking new lines of business. It perpetuates this impression by organizing glitzy events and exhibitions where mobile operators rub shoulders with the leading figures from the world of the internet and digital media.
Positioning themselves more as network operators and enablers of the digital economy than as consumer brands could have other benefits. Operators in many countries face mounting costs for securing planning permission for new sites, leasing sites from private landlords, and mobile backhaul. Yet these issues are invisible to the wider public. If there were greater awareness, governments and regulators might be more inclined to support mobile operators in their build-out of digital infrastructure.